SAFE KEEPING OF CRYPTO ASSETS

SAFE KEEPING OF CRYPTO ASSETS

You just spent $100k buying cryptos on an exchange, then you heard how another exchange's clients got hacked or phished  surprised What next? 

One way is to keep those cryptos by yourself in your wallet.  Let's talk about some ways to do that...

As you increase your crypto holdings, it is natural for you to place more emphasis on the safe keeping of those assets. That is not to say that keeping on a crypto exchange is inapt, but there are different ways to achieve varying objectives. When you keep crypto on exchanges, it is really convenient to deal and trade, allowing you to take advantage of price movements in the market. However, most of news on hacks and attacks made public are crypto exchanges related. Even one of the world's largest exchanges Binance, lost about USD 40 million in 2019 due to external attacks. One of the issues is that crypto exchange keep the private key to your crypto and the API key, which if they are lost to attackers, your crypto would be as well. There are other ways to keep your crypto assets safe...

 

THIRD PARTY CUSTODIAN

One way is to keep the assets with third party custodian outside of exchanges. Custodian's core business is to safe keep assets, as oppose to an exchange which makes money from trading and brokerage. Given the focus on custody of assets, you can expect custodian to dedicate funds to build and enhance crypto wallets with top notch security. There are a few good, reputable custodians such as Onchain Custodian (https://oncustodian.com), Coinbase Custody (https://custody.coinbase.com), Bitgo (https://www.bitgo.com) and Cobo (https://cobo.com). Their core offerings are similar with wallet and custody services, but they different in services, geographic focus, licencing and others. These custodians are quickly evolving, offering more services than holding assets, to providing financial services such as asset management and lending. 

 

PAPER WALLET

Paper wallet may sound really silly, but this is an option for someone who doesn't believe in keeping any traces of your private key online or in a digital format. The private key in this case is reflected on a printed format, never transmitted over the internet, which makes it really safe from online hacks. If you have experienced losing your notebook or piece of paper, then this is probably not the best solution for you. An option to get your paper wallet would be MyCelium (https://mycelium.com). It is rather safe due to its use of a USB dongle that connects directly to your printer, and thus never interfaces with your computer.

 

DESKTOP & MOBILE WALLET

If you want to keep the private key offline, but in a digital format that you control, safe keep on the computer or hard disk, then a desktop wallet is a great option. Desktop wallet usually comes with a client or browser plugin that you can use to access the wallet and make transactions. The digital format allows you to maintain control over the private key, only exposing it to the internet when you need to sign and broadcast a transaction through the internet. One of my favourite wallet that can be integrated with browser is Metamask wallet (https://metamask.io). It is easy to use with a simple GUI, to view, buy and send crypto. A more connected type of desktop wallet that connects on mobile phone is also available such as Jaxx Liberty wallet (https://www.jaxx.io), which supports Andriod and iOS, Windows, Linux, or Google Chrome extension.

 

HARDWARE WALLET

A desktop or mobile wallet is only as safe as the device is. If your desktop is already infected with malware or virus, then it does not matter if you keep the private key offline most of the time. To ensure that the hardware environment is clean and the wallet private key cannot be extracted after its creation, a controlled environment or a hardware ledger device is the solution. Two of the most well known hardware devices are Trezor (https://trezor.io) and Ledger (https://www.ledger.com). These devices allow user to to generate private key to wallet, keep that private key in the device and then expose it only for transaction purpose. These devices generally have encryption and prevention measures against extraction of private key. These devices also have recovery measures if the user ever loses the devices. More importantly, they are relatively small compared to computers and easy to bring around. 

 

What do you use to safe keep your private key and crypto assets safe? Do you have any other means to share?

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